Interactive Investor

Why AIM's EVR Holdings just surged 42%

22nd December 2016 11:53

Lee Wild from interactive investor

Up 12.7% so far in 2016, the FTSE 100 is the best-performing of London's major indices, but only just. Breathing down its neck is a bunch of Britain's most exciting companies found on the AIM All-Share. The junior index is up 12% this year, and by over 22% since the post-EU referendum crash. That's thanks in no small part to innovative firms like EVR Holdings.

EVR, a creator of virtual reality (VR) content, listed on AIM in May following a reverse takeover of Armstrong Ventures plc. At the time, the shares were worth little more than a penny and the business valued at £5 million.

But experts were bullish. Deloitte thinks the industry will break the $1 billion barrier for the first time this year - we've already seen the launch of launches of Oculus Rift, Playstation VR and HTC Vive. Goldman Sachs believes the market could be worth a colossal $80 billion by 2025.

And EVR proved its own popularity in September when it raised £3.4 million in an oversubscribed share placing at 1.7p. That came just weeks after it agreed a strategic partnership with Telefónica to showcase the MelodyVR app across its 665 O2 branded German stores.

Now, up 20% Thursday at 4p, the company is worth £38 million after its MelodyVR operating division signed a VR content creation and distribution agreement with record company Warner Music and WEA International.

But the shares did trade as high as 4.8p in early trade, up 42% to a new high, as investors heard that Warner had also requested an option to subscribe for 43.2 million EVR shares at 4.25p at any time over the next five years.

And there is certainly reason for optimism. As part of the framework deal, MelodyVR can distribute both live and pre-recorded content created with Warner artists via its music platform for an exclusive period. Then there's a period of joint-exploitation by both parties.

"The agreement aims to streamline the creation and distribution of virtual reality content featuring Warner artists and also unlocks a substantial portion of our existing content library for commercial exploitation," explains EVR chief Anthony Matchett, calling the deal "a significant milestone."

He said the share option "shows both [Warner's] confidence and conviction in the enormous potential of virtual reality as well as in the long-term success of EVR Holdings and the MelodyVR platform."

On Christmas Eve, the company will also launch a staged beta programme for 1,000 initial users in Europe and the US to test advanced platform functionality and exclusive content, accessible via Samsung Gear VR devices.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.